While recognising that the spread of the coronavirus COVID-19 is first and foremost a public health emergency, UNCTAD (the United Nations Conference on Trade and Development) has warned that it is also a significant economic threat.
Its latest report, “The coronavirus shock: A story of another global crisis foretold and what policymakers should be doing about it” can be found at unctad.org.
It highlights that the virus shock will trigger a recession in some countries and a deceleration of global annual growth to below 2.5% - often taken as the recessionary threshold for the world economy.
“The duration and depth of the crisis will depend on three variables,” the report argues. “How far and fast the virus spreads, how long before a vaccine is found, and how effective policy-makers will be in mitigating the damage to our physical and economic health and well-being.”
UNCTAD focuses on the third of these variables, arguing that a combination of asset price deflation, weaker aggregate demand, heightened debt distress and a worsening income distribution could trigger a more vicious downward spiral.
“No one saw this coming – but the bigger story is a decade of debt, delusion and policy drift,” Richard Kozul-Wright, UNCTAD’s director of globalisation and development strategies, said.
UNCTAD’s analysis points out that a persistent belief in the soundness of economic fundamentals and a self-correcting world economy continues to hamper policy thinking in the advanced economies.
“Ultimately,” Mr. Kozul-Wright concluded, “a series of dedicated policy responses and institutional reforms are needed to prevent a localized health scare in a food market in Central China from turning into a global economic meltdown.”
Last reviewed 25 March 2020